Cheat Sheet: The dangers of paying for online reviews

Whether you’re looking to book a hotel, choose a restaurant or hire a plumber, a host of online review sites can help you make the decision. But who’s behind the feedback on such sites? Experts say that it’s not always satisfied customers penning paeans to their favorite businesses, but rather companies themselves that are paying for glowing reviews. In our March issue, InsideCounsel examines the trend of paid-for reviews—and the possible risks that the practice could pose for companies.

How often do companies buy fake reviews?

A recent study by IT research firm Gartner Inc. found that between 10 and 15 percent of online business and product reviews are tainted in some way. In some instances, companies use sites such as Craigslist, Freelancer and Fiverr to find people who will write positive reviews in exchange for anywhere between $1 and $200, according to Jenny Sussin, a senior research analyst at Gartner.

What are the benefits of paying for reviews?

Positive reviews can give a business much-needed credibility and exposure, experts say. And that can translate into financial gains: Sixty-three percent of consumers are more likely to buy something from a site where there are user reviews, according to Jenny Sussin.

Some companies also post such reviews in the hope that their products or services will go viral. “Some businesses think they can jump-start that process by having it look like ordinary consumers are raving about a product and hoping that that catches fire among other consumers and then snowballs from there,” says Eric Goldman, a professor at Santa Clara University Law School.

What are the risks of this practice?

Falsifying positive reviews can raise a company’s profile, but the risks of the practice are at least as great, experts say. For one thing, a company’s reputation can take a serious hit if consumers learn of such deception. There can also be legal consequences in the form of lawsuits from customers, competitors or government agencies such as the Federal Trade Commission (FTC).

In 2009, the FTC published guidance in which it made clear that paying for positive reviews, and failing to disclose that fact, constitutes deceptive advertising. “The FTC has decided that it’s going to fight the battle of trying to maintain content authenticity online,” Goldman says. “As a result, they are looking for opportunities to punish folks who are not playing by those rules.”

Are review sites liable for paid-for reviews posted to them?

No, at least not in the U.S. Thanks to Section 230 of the Communications Decency Act of 1996, websites can’t be held liable for third-party content. But not all companies are shielded from such lawsuits. In the U.K., for instance, the airline review site Skytrax had to retract claims that its reviews were “checked” and “trusted” after the Advertising Standards Authority found that it failed to take “all reasonable steps to ensure that reviews were checked, trusted and made by ‘real’ people with ‘real’ opinions.”

What are review sites doing to combat fake reviews?

Although American review sites aren’t legally responsible for the reviews that users and businesses write, some are still fighting back against falsified postings. Yelp, for example, uses a search algorithm to hide reviews that it believes are fake. The site also announced in October 2012 that it will post a consumer alert for 90 days on the page of any business that it finds has paid for positive reviews.